POSCO to enter palm oil refining market in Indonesia

POSCO International Co., a trading arm of South Korea’s steel giant POSCO Co., will build a palm oil refining plant in Indonesia to foray into the growing refined vegetable oil market, the company said on Tuesday.

The trading company decided at a recent board meeting to invest $200 million to build the facility, as part of its push into more diverse, profitable businesses.

It will begin construction of the plant in the fourth quarter of this year, which will have an annual production capacity of 500,000 tons.

POSCO aims to start running it in the second quarter of 2025. Its Singapore-based holding company AGPA will manage the facility.

Kalimantan in southern Borneo is the candidate location for the new facility, given its favorable geographical condition for the transport and export of palm oil materials and products.  

Palm oil refining is the process of filtering out impurities from oil produced in palm oil plantations. Refined palm oil is used for cooking and beauty products, and as a bioenergy source.

POSCO plans to sell the refined vegetable oil both in Indonesia and other countries, including South Korea and China.

Palm oil boasts a higher production yield per hectare than any other major vegetable oil. It produces 10 times more oil than soybean oil and seven times more than sunflower oil.

The palm oil price soared to as high as $1,800 per ton in early last year, driven by supply shortages, compared to $600 in 2020.

Since then, it has been hovering around $950 per ton. Industry observers say its price will likely remain firmer over the next 10 years.

POSCO has been running a palm plantation in Papua, east of Borneo, since 2017.

Last year, the company produced 180,000 tons of crude palm oil, which translated into $80 million in operating profit and $170 million in sales.

Those figures were 4.4 times and 2.3 times more than its 2020 output, respectively.

Last week, the trading company completed a merger with its affiliate POSCO Energy Co. to further its push into the energy, food and eco-friendly businesses.

Write to Kyung-Min Kang at kkm1026@hankyung.com
Yeonhee Kim edited this article